On the platform producer side of the value chain, the successful telecom provider forges partnerships with the most innovative and independent software platform as a service vendor (IPV) to provide real-time service composition and assembly, service management, and governance and a service exchange infrastructure. The partnership should require the platform partners to integrate to the telecom provider's managed services such as security, billing, storage, service assurance, and QoS services. Since the platform-as-service offerings are hosted, the telecom provider can further enhance its business by selling data center and computer hosting services to these partners. Although this sounds like double dipping (and it is), it provides tremendous scalability and performance benefits for everyone due to the proximity of all the platform services. On the application component producer side of the value chain, traditional ISVs and independent new entrants throughout the global economy can use the service exchange infrastructure to catalog their application-specific components as services. The telecom provider can also sell data center and computer hosting service to these independent application component vendors (ICVs).

Finally, telecom-SaaS providers bring the software platform-as-a-service with a catalog of application services to end customers and SIs. The customer chooses some of the application components out-of-the-box and uses model-driven platform services to rapidly assemble highly customized and integrated solutions on-demand using internal IT staff or SIs.

Unlike traditional enterprise software license sales, the telecom provider's sales force won't require any specific domain knowledge for selling telecom-SaaS offerings. Instead, it's focused on exposing the customer to the telecom-SaaS and its new economics through select use-cases. Then, the customer can easily evaluate any of the offerings and use what it needs on a pay-as-you-go basis instead of the elaborate enterprise software acquisition process common today. Each ICV is responsible for providing standardized marketing collateral in the form of recorded presentations and demos to provide domain-specific information. The telecom-SaaS platform enables a pull model where the customer pulls what it needs when it needs it as opposed to the push sales model common today. The pull model is enabled through the service exchange and can utilize social networks to connect customers across verticals and common interests.

The Size of the Opportunity & Revenue Distribution
Extending an estimated CAGR of 7.7% growth in software spending through 2016, as IDC assumes at least until 2010, new software spending will exceed $250 billion in 2016 while total software spending reaches $510 billion. Note that the IDC growth estimate in 2005 didn't consider the additional growth factor of telecom and software convergence through the telecom-SaaS offering. Considering the exponential decay of traditional software's share in new software spending and the new economics of solutions, $218 billion in software spending will flow through the telecom industry as revenue. Out of the $218 billion in revenue, approximately $50 billion of the $76 billion ICV fees paid by the customer will be passed to ICVs assuming the telecom provider will earn a 35% channel fee for sales and distribution. Also, approximately $56 billion of the $142 billion in IPV fees paid by the customer will be passed to IPVs assuming a 60% channel fee for sales, marketing, and distribution.

The convergence of the telecom and software industries through the telecom-SaaS distribution channel will result in a global wave of IT growth. This wave will create major global opportunities for independent software vendors in providing platform, application component, and packaged composite applications as services. In addition, it will fuel the market for SIs by bolstering demand for professional services for on-demand application assembly and reassembly.

SMB and Fortune 2000 enterprise customers are the biggest winners in convergence. The global nature and the large scale of the telecom-SaaS results in the rapid commoditization of application service components. The on-demand composition and assembly of application services also increases the responsiveness of businesses to changing business requirements.

By now, you maybe wondering, who makes the best early adopter for the telecom-SaaS offerings? I'd have to say the telecom provider who wants to be at the forefront of convergence.